S.S. Lazio SpA is the surprise leader
of Italy’s Serie A soccer league and the best performer on the
FTSE Italia all-share index this year. No analysts follow the
stock and money managers say erratic earnings make the company a
risky investment.

Italy is the only European country with three soccer clubs
trading on its main stock market. Tottenham Hotspur Plc and
Millwall Holdings Plc are listed on the London Stock Exchange,
while Arsenal Football Club and Rangers Football Club are on the
Plus Market Plc for small- and mid-cap companies.

Lazio exemplifies why soccer teams should be avoided by
most investors, said Gianmaria Bergantino, who helps manage 200
million euros ($285 million) at Bank Insinger de Beaufort in
Rome. Italy’s securities regulator Consob recommended Oct. 1
that the country’s listed clubs improve their disclosures about
players’ compensation and be more specific when making
announcements about the transfer market.

“Soccer clubs are difficult to value because of variable
and uncertain revenue and limited transparency about players’
contracts,” said Bergantino, who doesn’t own shares in soccer
companies. “They aren’t very popular among brokerages and
institutional investors.”

Lazio, the cross-town rival of A.S. Roma SpA in Italy’s
capital, has advanced 252 percent in Milan trading this year,
giving it a market value to 80 million euros this year. The
stock gained about 4 percent in 2009.

Lazio has won seven of its first nine games of the 2010-
2011 season, sitting atop the Italian league with 22 points,
followed by European Champions Inter Milan with 18 points. It
finished 12th in the Serie A last season.

The winner of two Italian titles in its 110-year history,
Lazio is controlled by businessman Claudio Lotito, who owns
about 67 percent of the club, according to Consob’s website.

Federsupporter, a Rome-based association of about 100
individual investors in sports teams, complained to Italian
securities regulator Consob on Oct. 28 about the stock’s
fluctuation.

Performance

“Lazio has had an anomalous performance in recent months
after four to five years of stable stock prices,”
Federsupporter President Alfredo Parisi said in a phone
interview. “There isn’t any publicly available news that can
explain this kind of gain. The Serie A lead isn’t enough to
justify this stunning escalation and the volumes.”

In the past 30 days, 3.29 million Lazio shares traded on
average each day, about five times the average daily volume of
the past six months.

Consob is monitoring the stock’s movement, according to a
spokesman for the regulator, who said that it’s a common
procedure when sharp price swings occur. On Nov. 1, a day after
its win against Palermo, Lazio rose 24 percent. Consob is
reviewing the company’s corporate governance because there may
be a conflict of interest in Lotito being chairman of the
company’s management committee as well as appointing its
supervisory board.

A Lazio spokesman in Rome declined to comment for this
story.

Lazio, along with Roma, are among 17 Italian companies that
must provide additional quarterly information about their
financial accounts to the regulator, according to Consob’s
website. Lazio had a fiscal fourth-quarter loss of 1.5 million
euros, according to data compiled by Bloomberg.

AC Milan, the team owned by Italian Prime Minister Silvio
Berlusconi, and the Moratti family’s Inter Milan, are closely
held. Lazio’s rival Roma has advanced 45 percent this year,
while Juventus Football Club SpA, controlled by the Agnelli
family, is up 10 percent on the Italian exchange.

Juventus, Inter and AC Milan rank eighth to 10th in
Deloitte’s Football Money League 2010 report published in March,
indicating “a gradual decline” in the position of Italian
clubs in recent years. Roma ranked 12th by revenue among the top
20 European clubs. Lazio wasn’t listed.

Alessandro Frigerio, a money manager at RMJ Sgr in Milan,
said Juventus is managed “like any other mid-cap.” RMJ, which
oversees about 100 million euros in assets, is the third-biggest
investor in Juventus after the Agnellis and the Libyan Foreign
Bank with about 178,000 shares, according to Bloomberg data.

Fundamentals

“We bought Juve on fundamentals as it was undervalued,”
Frigerio said. “The financial community is very reluctant about
Italian soccer clubs as it’s very difficult to value them. It’s
almost all immaterial, just like Internet companies.”

There are no publicly traded teams in Spain, while in the
Netherlands, AFC Ajax NV, the four-time winner of the European
Cup, is the only publicly traded team. Borussia Dortmund GmbH &
Co KGaA, Germany’s only publicly traded soccer club, is at the
top of the country’s Bundesliga. The stock has gained 85.5
percent this year.

“There is an almost one-to-one relationship between the
outcome of matches and the stock performance,” Sebastian Hein,
an analyst at Bankhaus Lampe, said. “Investors are mainly
supporters of the team, with very few big investors.”

Hein, who has a “hold” rating on Borussia Dortmund, is
the only analyst following the stock. The rating is part of
Bankhaus Lampe’s coverage of German small-cap stocks, he said.

Bank Insinger’s Bergantino said shares of soccer teams only
appeal to their fans. “Lazio’s recent huge gains will turn into
huge losses as soon as it’s defeated in a few matches,” he
said.

“Investors should stay away from soccer clubs, if they
want to gamble, I’d suggest a betting agency.”